'How we cracked DIY investing'

Who better to advise novice investors than those who have already learned the
hard way?

Do-it-yourself investing is taking off. More than 30,000 private investors started a savings plan with just one company during the first three months of the year. The firm, Hargreaves Lansdown, now has almost half a million customers, a sign of the growing pressure on individuals to manage their own long-term savings. The death of final salary pensions, and changes to state benefits that mean that saving for retirement should always pay, are two of the factors encouraging more people to take control of their own future.

A recent ban on commission payments to financial advisers has also made it harder for small investors to get advice without an upfront bill. But if you are about to start managing your own investments, who better to advise you than people who have been doing just that for years?

Below, investors who run their own pension savings through Sippdeal, the self-invested pension company, describe how they invest and the biggest lessons they have learnt.

'Start with funds and move on to shares'

Oleksiy Osnach, a 26-year-old business adviser, has a degree in economics and started his Sipp in 2010.

Research is always vital, he said, but added that "funds require less research, so for novices it makes sense to start there". He said: "When you start, buy in the industries you know well. I like large-cap shares with growth potential as wells as recovery stocks – I bought BP soon after the Gulf of Mexico disaster, when it was heavily oversold. It pays to buy on the dips."

'I'm investing for the long term – I don't bother trying to time the market'

Mike Garrish, a 43-year-oldIT analyst from Devon, has been managing his investments since 2005

"The big lesson is that costs might not seem to make a large difference now but will do over the long run," he said. "I use my Sipp trading platform because of the low trading costs and I never buy actively managed funds. Instead, I use trackers and individual blue chip shares."

The total costs in his portfolio come to just 0.15pc of assets, he calculated. Many active funds charge about 1.7pc. "At first I just invested in a FTSE tracker, but later I learnt the benefits of diversification," Mr Garrish said. "Now I have a balanced portfolio – 40pc UK shares, 30pc global shares, 20pc bonds and 10pc property.

"I've learnt not to worry too much about prices. I'm investing for the long term and in 20 years' time any attempts at market timing now will look pretty irrelevant."

'Sometimes you have to cut your losses. I learnt the hard way with RBS shares'

Kas Kabbani, 52, fromCheshire, started buying shares with the privatisations of the Eighties. He later became a stockbroker, retiring two years ago after 20 years in the business.

"I check the markets daily with my apps – Bloomberg and CNBC," he said. "If you can't do this, at least find out when important announcements are due. Then monitor the shares closely in the days leading up to them."

Mr Kabbani tends to review his holdings every six months. But he sometimes operates a "stop loss" on speculative short-term investments – shares are sold automatically if they fall to a predetermined level, limiting losses.

He added: "Don't be afraid to bite the bullet and cut your losses. I should've done this when I owned RBS shares." Another lesson was that not every stock with a low "price to earnings ratio" (or p/e) is a bargain. He said: "I did buy one share on a p/e of two and the company went under weeks later. I learnt that if a stock appeared cheap, there was usually a reason for it."

'Mimic a successful fund to avoid paying the fee'

Bill Webster, 67, a retired IT manager from Barnet, started managing his own money 10 years ago. He has a novel approach to cutting the cost of investment.

"I sold out of a very big equity income fund and bought the top dozen holdings directly to save myself a 1.8pc management fee," he said. He has also begun to switch from unit trusts to investment trusts – "the costs are considerably lower".

Mr Webster added: "I look for funds with consistently good long-term performance. This may not guarantee good future performance, but it's a good guide." He also likes funds in which the manager has a large stake.

'Buy businesses you understand'

Nick Thompson, 65, from Devon, has been investing in his Sipp for three years.

"I'm responsible for all the decisions, both good and not-so-good," he said, "as I think the 'expertise' of fund managers is mostly a myth spread by fund managers."

He preferred to buy businesses he understood. "As an engineer, I tend towards manufacturing and utilities. I like established companies that are leaders in their field, generally with significant worldwide sales."

'You can lose everything if you take too much risk'

Roger Matthews, 71, from Chichester, has been managing his own portfolio for nine years. He likes shares in large and medium-sized companies – but has other ways to reduce risk.

"I avoid mining and oil stocks. I look for steady plodders with a decent yield and I never let a holding exceed 10pc of my portfolio," he said.

"It's tempting to think you could have made a fortune backing your best investment – one has gone up by 300pc since I bought it in 2009. But I have friends who had all their investments in Barclays just before the financial crisis. The shares have recovered but you can lose everything if you take too much risk."

'Trading in and out can easily go wrong'

Richard Batho, 71, from Hereford, has been managing his own money for 30 years. He has a simple formula: "invest in good dividend-paying shares and reinvest the proceeds".

But he has learnt some lessons the hard way. "I've bought shares in companies that have gone bust, most recently Aero Inventory and Clinton Cards.

"I probably do less selling and hoping to buy back at a lower price now than when I first started – the result of bad experience."

'Forget wonder stocks'

Ian Brummer, 63, from Kent, who owns a cleaning company, has had his Sipp since 2002.

"A few large shares have gone down but the biggest losers have been the 'gambling' shares," he said. "Everyone thinks they can find the next wonder stock which will make them a fortune but that's very hard."

Charles Galbraith, the managing director of Sippdeal, said: "All investors will make good decisions and some that they will perhaps view as mistakes and professionals are no different. Investment success is about having more winners than losers and getting the right balance between potential risk and reward.

"Talking to our clients it's clear that many DIY investors take a sensible, cautious approach. It’s common for beginners to start with investment trusts and trackers or adopt a simple long-term buy and hold strategy. Then they build up the confidence to begin buying individual equities – possibly starting with large cap and maybe becoming more adventurous later with smaller, higher risk companies. They build their experience and learn from their mistakes and successes."

He added: "It's also clear that our clients value being in control, with information and tools readily available at their fingertips. Research among our clients shows that around three quarters of them go online every week to check how their portfolios are performing and one in eight goes online every day.

"During our research, it was clear to see the passion that investors have for DIY investing. As one Sippdeal investor put it: 'Nobody cares about my money as much as I do'.”